Apr. 10, 2013

Written by

Detroit Free Press Staff Writer

An Alabama businessman has agreed to pay $4 million to Detroit's two embattled pension funds to settle a 5-year-old lawsuit involving a failed $30-million airline investment -- and more pay-to-play schemes linked to ex-Detroit Mayor Kwame Kilpatrick.

The businessman, Donald Watkins, had claimed that some pension trustees shook him down for donations to Kilpatrick's legal defense fund, free flights on his jet and campaign contributions, but that he refused to participate.

But the pension funds -- one for the police and fire departments, another for general city workers -- claimed that Watkins did them wrong and cost them millions.

In 2008, the two funds sued Watkins over the demise of his air cargo company, TradeWinds Airlines. Watkins had persuaded the funds in 2007 to invest $30 million in TradeWinds, but the company declared bankruptcy after receiving the pension funds' money.

A settlement in the case was filed Monday in U.S. District Court. Under the terms of the deal, Watkins also has agreed to pay $250,000 in interest to the funds. He has four years to pay the full amount.

Tom Sheehan, chair of the General Retirement System of the City of Detroit, said in a statement: "The Board of Trustees has determined this resolution to be in the best interest of the pension fund."

Neither Watkins nor his attorney was available for comment Wednesday.

Watkins had claimed in court documents that the pension funds breached loan agreements by wrongfully declaring certain defaults and by taking actions that prevented the performance of the loan agreements.

Watkins' lawsuit also revealed for the first time that former city Treasurer Jeff Beasley, a onetime fraternity brother to Kilpatrick and former pension trustee, was a target in the federal government's years-long pension probe.

Beasley is facing trial in June on charges he took bribes and kickbacks in a scheme that cost the pension funds $84 million in losses.